The Value in Understanding Customer Worth
I was surprised to discover during a recent business trip that my airline carrier stopped serving complimentary snacks to domestic passengers flying coach. While unquestionably an unpopular policy for many travelers, it's actually a clever business decision. Airlines realize that the priority for passengers is ticket price, not amenities. Food is no longer a distinguishing perk, but a mere cost.
A large percentage of airlines’ revenue comes from a small percentage of their customers — those who fly in first class versus coach. Understanding this concept, the airline industry has figured out how to segment based on value. Travelers who fly for comfort and shell out big bucks for amenities are worth more to the airlines than those of us that fly for convenience. As a result, there's no need to squander budgetary resources by luring coach passengers with perks such as pretzels or pillows. The airlines already know which of their customers are going to generate the greatest revenue.
Marketing to customers based on the notion of value will not only generate greater revenues for airlines, but for any marketer looking for more effective ways to acquire and retain customers. Just as certain travelers are more valuable to airlines than others, consumers who have high valuations to particular items, products or services are worth more to those respective marketers.
For example, at any given time a consumer could have a potential interest and valuation to the newest Nike sneakers, while another consumer may have a high valuation to a bed-and-breakfast in St. Lucia. These valuations change every day based on any number of variables, including location, life stage and seasonality, just to name a few. Once marketers are able to gauge their customers’ individual value, they can fundamentally change the way they market to them.